2008-025 Finance - McGladrey & Pullen

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Orange County, North Carolina April 23, 2007 Page 2 • Reports on compliance with laws, regulations, and the provision of contracts or grant agreements. We will report on any noncompliance which could have a material effect on the financial statements and any noncompliance which could have a direct and material effect on each major program. A schedule of findings and questioned costs. Communication with the County's Board relating to the conduct of the audit as required by Govemmenf Auditing Standards. The funds that you have told us are maintained by the County and that are to be included as part of our audit are listed below: General fund Special revenue funds Capital projects funds Proprietary funds Fiduciary funds The federal and state financial assistance programs that you have told us that the County participates in and that are to be included as part of the single audit compliance examination are listed in Attachment A. The component unit whose financial statements you have told us are to be combined with and included as part of the County's basic financial statements is the Orange County ABC Board. The Orange County ABC Board will be . disclosed through discrete presentation as a component unit, as required by Governmental Accounting Standards Board (°GASB")14. Another CPA Firm will audit the Orange County ABC Board. Our reports on internal control will include any significant deficiencies and material weaknesses in the system of which we become aware as a result of obtaining an understanding of intemal control and performing tests of intemal control consistent with requirements of the standards and circular identified above. Our reports on compliance will address material errors, fraud, violations of compliance requirements and other responsibilities imposed by state and federal statutes and regulations and assumed by contracts; and any state or federal grant, entitlement or loan program questioned costs of which we become aware, consistent with requirements of the standards and circulars identified above. tf circumstances arise relating to the condition of the County's records, the availability of sufficient, competent evidential matter, or indications of a significant risk of material misstatement of the financial statements because of error, fraudulent financial reporting, misappropriation of assets, or noncompliance which in our professional judgment prevent us from completing the audit or forming an opinion, we retain the unilateral right to take any course of action permitted by professional standards, including declining to express an opinion or issue a report, or withdrawal from the engagement. As you know, management is responsible for (1) the preparation of the County's financial statements and the schedule of Federal and State awards, (2) establishing and maintaining effective intemal control over financial reporting and safeguarding assets and intemal control over compliance, including monitoring ongoing activities, and for informing us of all significant defciencies in the design or operation of such controls of which it has knowledge (3) properly recording transactions in the records, (4) identifying and ensuring that the County complies with the laws and regulations applicable to its activities, and for informing us about all known material violations of such laws or regulations, (5) the design and implementation of programs and controls to prevent and detect fraud, and for • informing us about all known or suspected fraud affecting the entity involving management, employees who have significant roles in intemal control and others where the fraud could have a material effect on the financial statements, (6) informing us of its knowledge of any allegations of fraud or suspected fraud affecting the entity